Wells Fargo Fined $1 Billion For Auto Insurance Scandal, Mortgage Misdeeds

Matt Posky
by Matt Posky
wells fargo fined 1 billion for auto insurance scandal mortgage misdeeds

Wells Fargo is getting slammed with all kinds of penalties over shady business practices. Currently prohibited from growing its business as investigators look into its practices, the bank has restructured itself after it was implicated in widespread auto insurance and mortgage lending abuse in the summer of 2017. It’s also still coping with an earlier scandal involving local branches opening fake accounts for customers.

Last week, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency suggested Well Fargo pay $1 billion to “resolve” the governmental probes into those issues. That changed today when the bureau filed a consent order announcing it was time for the bank to pay up.

The fine applies to the mortgage lending issues, as well as Wells Fargo’s past practice of charging thousands of auto loan customers for insurance they didn’t need and often didn’t even know about. The move caused some borrowers to default on their loans, resulting in their vehicles being repossessed. The consent order mandates that the bank remediate those customers.

The Consumer Financial Protection Bureau said it assessed a $1 billion penalty against Wells Fargo and credited a $500 million penalty collected by the Office of the Comptroller of the Currency toward the total fine.

While the fine is among the largest ever levied on a bank in the United States, analysts claim it won’t spell the end for the company.

“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on them — only time can tell,” Art Hogan, chief market strategist at B. Riley in Boston, told Reuters. “Companies have come back from worse than this but right now they’re still in the eye of the storm.”

Despite the bank’s shares taking a dive after the scandal became public knowledge in 2017, they appear to have stabilized somewhat within the last month.

Over 800,000 customers were believed to be affected by the auto insurance issue over roughly a four-year period. In August, Wells Fargo said it found that, in issuing auto loans, the bank charged some customers extra for collision insurance, even when customers already had it in their policy. President Donald Trump said federal agencies needed to go after the bank hard to set an example.

Afterward, the Federal Reserve mandated that Wells Fargo could not grow its business until it fixed its multitude of problems (and offered proof). The $1 billion penalty is the largest the Consumer Financial Protection Bureau has ever issued.

[Image: Ron Cogswell/ Flickr ( CC BY 2.0)]

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  • 87 Morgan 87 Morgan on Apr 20, 2018

    I worked for WF for 5.5 years. I firmly believe the issues that are pervasive at WF and most likely the other large banks are a failure of the regulatory authorities in as much as they allowed the banks to get the size they are. We need regional banks. Yes, you get multiple people doing the same job, but they are decent paying jobs. IMHO we don't need 5 or 6 large banks: Chase, WF, Citibank, BOA, I am sure I am missing one or two. The beast is too large and has an insatiable appetite for stock price appreciation which gets more and more difficult to achieve. I for one, would not be upset if a decision was made to systematically begin dismantling these too large banking conglomerates that have the capacity to tank our entire economy. Nothing should be that big. One guys opinion.

    • Ktm Ktm on Apr 23, 2018

      Regional banks just won't work in today's world. I travel across the country quite frequently and internationally on occasion. When traveling cross-country, I can go to a BoA branch and withdraw money without a fee. I can transfer funds immediately to another BoA branch across the country instantaneously (just did a $10k transfer from LA to Port St Lucie, FL and my father had the funds immediately). Try that with regional banks.....

  • Geozinger Geozinger on Apr 21, 2018

    During the Reagan administration, the policies and protections put in place by post Great Depression-era regulators were relaxed or erased. Some of them included that banks could not own insurance companies and strict limits on growth (or mergers). These men had seen what unregulated commerce could do to an economy (along with tone-deaf governmental policy). But that was in the 1930's. By the 1980's, all of those hard times had been forgotten, the people who wrote the policies were long dead... Add another 20 years to the calendars and we have the Great Financial Crisis, or Great Depression, Part Deux. In the wake of the GFC, the "Masters of the Universe", who nearly destroyed our economy (as we knew it) received no real punishment. Our government, forced to keep them afloat, propped up these companies so their management could go on living their fantasy lives. While at the same time, the domestic car companies got billions in loan guarantees, and the general public scorned them, even though these same companies made up 7-10% of GDP and produced something tangible... With little regulation in place and political parties that grovel for money, what's left to stop them? No real opposition, other than some scattered legacy regulations and maybe the CFPB... A billion bucks? Pocket change...

  • Aidian Holder I'm not interested in buying anything from a company that deliberately targets all their production in crappy union-busting states. Ford decided to build their EV manufaturing in Tennessee. The company built it there because of an anti-union legal environment. I won't buy another Ford because of that. I've owned four Fords to date -- three of them pickups. I'm shopping for a new one. It won't be a Ford Lightning. If you care about your fellow workers, you won't buy one either.
  • Denis Jeep have other cars?!?
  • Darren Mertz In 2000, after reading the glowing reviews from c/d in 1998, I decided that was the car for me (yep, it took me 2 years to make up my mind). I found a 1999 with 24k on the clock at a local Volvo dealership. I think the salesman was more impressed with it than I was. It was everything I had hoped for. Comfortable, stylish, roomy, refined, efficient, flexible, ... I can't think of more superlatives right now but there are likely more. I had that car until just last year at this time. A red light runner t-boned me and my partner who was in the passenger seat. The cops estimate the other driver hit us at about 50 mph - on a city street. My partner wasn't visibly injured (when the seat air bag went off it shoved him out of the way of the intruding car) but his hip was rather tweaked. My car, though, was gone. I cried like a baby when they towed it away. I ruminated for months trying to decide how to replace it. Luckily, we had my 1998 SAAB 9000 as a spare car to use. I decided early on that there would be no new car considered. I loathe touch screens. I'm also not a fan of climate control. Months went by. I decided to keep looking for another B5 Passat. As the author wrote, the B5.5 just looked 'over done'. October this past year I found my Cinderella slipper - an early 2001. Same silver color. Same black leather interior. Same 1.8T engine. Same 5 speed manual transmission. I was happier than a pig in sh!t. But a little sad also. I had replaced my baby. But life goes on. I drive it every day to work which takes me over some rather twisty freeway ramps. I love the light snarel as I charge up some steep hills on my way home. So, I'm a dyed-in-the-wool Passat guy.
  • Paul Mezhir As awful as the styling was on these cars, they were beautifully assembled and extremely well finished for the day. The doors closed solidly, the ride was extremely quiet and the absence of squeaks and rattles was commendable. As for styling? Everything's beautiful in it's own way.....except for the VI coupe....it's proportions were just odd: the passenger compartment and wheelbase seemed to be way too short, especially compared to the VI sedan. Even the short-lived Town Coupe had much better proportions. None of the fox-body Lincolns could compare to the beautiful proportions of the Mark V.....it was the epitome of long, low, sleek and elegant. The proportions were just about perfect from every angle.
  • ToolGuy Silhouetting yourself on a ridge like that is an excellent way to get yourself shot ( Skylining)."Don't you know there's a special military operation on?"